The strengthening of the UAE dirham against the Indian rupee in recent months is expected to make imports from India more affordable, offering relief to consumers by reducing inflation, according to market analysts and retailers.
Rupee at Record Low
The Indian rupee recently hit an all-time low of nearly 24 against the UAE dirham, driven by the strong performance of the US dollar. Over the past year, the rupee has fallen from 22.5 to nearly 24 per dirham, according to currency tracking platform xe.com.
As a result, Indian food and commodity prices in the UAE could decline by up to 15%, said Dr. Dhananjay Datar, chairman of Al Adil Supermarkets, a major retailer that imports more than 10,000 food and non-food items from India.
“With the rupee weakening, food prices will naturally go down, making essential goods more affordable for UAE consumers,” Dr. Datar explained.
Impact on Inflation and Trade
Analysts say that a stronger dirham makes imports cheaper, particularly from countries like India, where the currency has weakened against it.
Hani Abuagla, senior market analyst at XTB Mena, said the dirham’s peg to the US dollar has been a key factor in its strength. This has allowed UAE businesses to purchase more goods from India for the same amount of dirhams, leading to lower costs for consumers.
“When the dirham strengthens against the Indian rupee, UAE businesses benefit as they can buy goods at lower prices. This helps in reducing inflation, particularly in categories like food and electronics,” said Abuagla.
However, he warned that inflation remains vulnerable to global economic factors, including the dirham’s peg to the dollar and rising housing costs.
“While a stronger dirham eases inflation in some areas, the UAE’s ability to control inflation through independent monetary policy is limited. Factors like global oil prices and housing market trends still play a significant role,” he added.
Lower Freight Costs Add to Price Reductions
In addition to currency fluctuations, freight costs between India and the UAE have significantly dropped due to the excessive availability of shipping containers. This has further contributed to the decline in import prices, boosting trade between the two countries.
India remains one of the UAE’s largest trading partners, with bilateral trade expected to reach $100 billion in the coming years.
Consumer Relief Amidst Economic Challenges
For consumers in the UAE, the cheaper imports could bring welcome relief amid inflationary pressures, especially in essential goods like food products. As the dirham remains strong, retailers are hopeful that prices will continue to stabilize, providing economic benefits to both businesses and residents.
